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Domino's (DPZ) Q3 Earnings Top, Revenues Lag, Stock Down

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Domino's Pizza, Inc. DPZ reported mixed results for fiscal third-quarter 2021, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Earnings topped the consensus estimate for the third straight quarter, whereas revenues missed the same after beating in the preceding two quarters. Following the results, the company’s shares declined 4.1% in the pre-market trading session.

Investor sentiments were hurt as it reported dismal U.S. same-store sales for third-quarter fiscal 2021 after posting positive comparable sales for the 41st straight quarter. Meanwhile, it reported strong international comps for the straight 111th quarter.

Earnings & Revenue Discussion

The company reported adjusted earnings per share of $3.24, which topped the Zacks Consensus Estimate of $3.11. The reported figure also increased 30.1% on a year-over-year basis. Earnings benefited from a lower weighted average share count owing to share repurchase and higher net income.

Revenues of $998 million missed the consensus mark of $1,034 million but rose 3.1% on a year-over-year basis. The upside was driven by international same-store sales growth and an increase in global store count during the preceding four quarters, in turn resulting in higher supply chain, U.S. franchise revenues as well as international franchise revenues.

In third-quarter fiscal 2021, it opened 333 stores, comprising 46 net new U.S. stores and 287 net new international stores.

Domino's Pizza Inc Price, Consensus and EPS Surprise

Domino's Pizza Inc Price, Consensus and EPS Surprise
Domino's Pizza Inc Price, Consensus and EPS Surprise

Domino's Pizza Inc price-consensus-eps-surprise-chart | Domino's Pizza Inc Quote

Comps

Global retail sales (including total sales of franchise and company-owned units) increased 10% on a year-over-year basis for the fiscal third quarter. The upside can be primarily attributed to growth in sales at domestic stores (up 1.1%) and international stores (up 19.6%). Excluding foreign currency impact, global retail sales increased 8.5% from the prior-year quarter.

For the fiscal third quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) decreased 1.9% from the year-ago period.

At domestic company-owned stores, comps declined 8.9% year over year versus 16.6% growth in the year-ago period. Also, domestic franchise store comps decreased 1.5% year over year versus 17.5% growth in the prior-year quarter.

Comps at international stores, excluding foreign currency translation, were up 8.8% year over year. This was higher than a 6.2% improvement in the year-ago quarter.

Margins

Domino’s operating margin expanded 120 basis points (bps) year over year to 38.6% for the reported quarter. Net income margin for the quarter came in at 12.1%, up 190 bps from the prior-year level.

Balance Sheet

As of Sep 12, 2021, cash and cash equivalents totaled $295.4 million, up from $168.8 million on Jan 3, 2021. It had $157.5 million of available borrowing capacity under 2021 variable funding notes, net of letters of credit issued of $42.5 million, at third quarter fiscal 2021-end.

Long-term debt at fiscal third quarter-end was $5 billion compared with $4.1 billion at the end of first-quarter 2021. Inventory amounted to $64.6 million compared with $66.7 million at the end of first-quarter 2021.

Net cash provided by operations totaled $484.6 million at fiscal third quarter-end. For the quarter under review, Domino’s incurred capital expenditures of $50.7 million.

For the fiscal third quarter, the company repurchased and retired 391,007 shares of its common stock under the share repurchase program.

Zacks Rank & Other Key Picks

Domino's currently has a Zacks Rank #2 (Buy). Other stocks in the same space that warrant a look include McDonald's Corporation MCD, Papa John's International, Inc. PZZA and Jack in the Box Inc. JACK, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McDonald's has a three-five year earnings per share growth rate of 11.7%.

Papa John's 2021 earnings are expected to rise 124.3%.

Jack in the Box has a trailing four-quarter earnings surprise of 26.4%, on average.


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